By Adedapo Adesanya
Oil prices trended south on Wednesday as investors weighed the intensifying war between Russia and Ukraine, and a rise in crude stocks in the United States.
Brent crude was down by 46 cents or 0.63 per cent to settle at $72.85 a barrel and the US West Texas Intermediate (WTI) crude depreciated by 29 cents or 0.42 per cent to $69.10 per barrel.
The conflict between Russia and Ukraine and subsequent concern around potential oil supply disruptions have helped shape the market so far this week.
Ukraine fired a volley of British Storm Shadow cruise missiles into Russia on Wednesday, the latest new Western weapon it has been permitted to use on Russian targets a day after it fired US ATACMS missiles.
Russia has said the use of Western weapons to strike into its territory far from the border would be a major escalation in the conflict.
Meanwhile, Ukraine says it needs the capability to defend itself by hitting Russian rear bases used to support the invasion, which entered its thousandth day this week.
Market analysts say this has put geopolitical risk back in the market.
Adding to the geopolitical tensions, the US vetoed a UN Security Council resolution for a ceasefire in Gaza on Wednesday.
The 15-member council voted on a resolution put forward by 10 non-permanent members that called for an “immediate, unconditional and permanent ceasefire” in the 13-month conflict and separately demanded the release of hostages.
This has created criticism for the Biden administration for once again blocking international action aimed at halting Israel’s war with Hamas.
The development could buoy oil prices’ war risk premium on investors’ concerns around potential disruptions to global oil supplies as war in the Middle East continues.
There are also expectations that global supply could be further squeezed, with the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ potentially set to push back output increases again when it meets on December 1 due to weak global oil demand.
Pressure came after the US Energy Information Administration (EIA) reported an inventory build of 500,000 barrels for the week to November 15.
The change compared with a build of 2.1 million barrels for the previous week, and another one, of 4.75 million barrels, estimated by the American Petroleum Institute (API) for the week. However, both last week’s EIA report and this week’s API report saw declines in fuel inventories.
Norway’s Equinor said it had restored full output capacity at the Johan Sverdrup oilfield in the North Sea following a power outage.
Meanwhile, the US Federal Reserve will likely trim interest rates next month but make smaller cuts in 2025 due to the risk of higher inflation from President-elect Donald Trump’s proposed policies.